Sarkozy fiddles with the wealth tax

The Head of State will have us believe that getting rid of the wealth tax will increase the economic competitivity of France vis-à-vis Germany. Baroin, the minister for the budget, confirms that the government wants it gone.

After the Council of Ministers meeting on Wednesday, Baroin, who is in charge of the Budget portfolio, confirmed that the working group he is heading is considering getting rid of the wealth tax [1] "We’re looking at the possibility of completely abolishing the wealth tax and at the same time removing the tax shield [2], and even introducing a new tax on the most wealthy”, that is to say "less a tax on property and more a tax on income from capital assets", he explained. Despite the air of innocence, the minister is in fact going back on his earlier remarks, in which he declared to be considering raising the threshold of the wealth tax rather than doing away with it altogether.

A symbol of the struggle against inequality

Nicolas Sarkozy’s Righting of the Right and of the government with his speech at Montmirail in front of an audience of business leaders thus translates into action. Though in his majority there are calls––political expediency in the run-up to the presidential qnd general 2012 elections –for minor adjustments of the wealth tax. Not so for Nicolas Sarkozy who wants to mark himself out as an opponent of the wealth tax, a symbol of the struggle against inequality. And to justify his position, the leader of the Right is ready to call upon a full hand of arguments.

Thus he tries to pretend that the suppression of the tax shield and the wealth tax will increase France’s competitivity vis-à-vis Germany. However, as is known, the introduction of the tax shield in 2007, which reduced the tax on the richest of the rich, those with strong interests in the CAC 40 [3] companies, did little to reduce the trade imbalance with our German partner. Quite the opposite, our deficit with Germany peaked near 20 billion euros in 2007 and 2008. Even if it fell due to the recession in 2009 and 2010, it still remained at a very high level––around 16 billion euros against 10 billion in 2003.

And then comes the best sleight of hand of all––Nicolas Sarkozy makes nothing of the fact that business property is in fact exempt from wealth tax which means that the wealth tax in fact has no influence whatsoever on the competitivity of businesses.

There’s yet another presidential conjuring trick concerning the taxation of large estates in Europe. Nicolas Sarkozy says that the wealth tax was abolished throughout Europe, yet it still exists in Norway, Hungary and Switzerland. Moreover, taxes on property cannot be reduced to the wealth tax. The president knows this all too well because shortly after his election in 2007, he launched a property donation reform, opening the way for the wealthiest households to transfer their wealth tax-free.

New provisions for the privileged

And a last point deserves close attention: Nicolas Sarkozy’s comment that he would like us to "think about the issue of taxing imports", because he’s "a little tired of the fact that imports don’t contribute anything to the funding of our welfare system". Could this perhaps be a way of supporting Jean-Francois Cope’s idea of shifting from the present system of employers’ social security system contributions to the sales tax? As though that tax would not ultimately and once again be paid by ordinary households. The tinkering continues.